Is it a good time to buy an investment condo? (rent, houses)

[LuvVA]

I would say look for one in Tysons or Reston areas. Now that metro is there, giving out for rental wouldn't be an issue.

But I am not sure what is your budget here.

[FCNova]

Originally Posted by spencgr

Not sure I follow....when I retire, I will need cash not an extra house. So, if I was investing, I'd look for something that has a better rate of return, to allow for more cash. I would never look to "break even" with my cash.

If you can pay for the condo directly; and you break even- then there is no difference than putting the money under the mattress.

If you are mortgaging the condo, and you just "break even" every month; you are actually losing money long term.

Cash flow and ROI are two different things. Just because a real estate investment is breaking even on cash flow doesn't mean it isn't earning a return. To figure out ROI you'd have to factor in the equity you're building, which is a function of paying down the mortgage and asset appreciation.

That said, if OP is strictly looking at investment options, I think there are much better options than real estate to earn a return on your investment. Real estate typically appreciates very slowly, and you'll have to deal with lots of expenses related to the property even as the rent you can charge increases. You may not earn a big return at all. The stock market will probably easily give you a better return with less work involved. Just make sure you diversify

[austindoxie1972]

This is a hard question because there are so many variables. One thing I'm noticing in the Tysons area is that there are a lot of rentals available -- and more condos and apartments are on the way. I'm thinking there will be an oversupply fairly soon. The Ascent in Tysons was giving away 3 months free rent with a 12 month lease, including a free indoor parking spot. Unreal. But they are hurting. AND...another building is going up right behind them, with more units coming online.

I don't know if this is true, but a friend at Freddie Mac and an appraiser who works in Tysons said most new apartment buildings are financed with 7- to 10-year balloon loans. At some point, some may flip into condo communities, especially if they can't find suitable investor financing. I own a condo in Tysons and wonder what this will do to the value of my place.

Just some things to ponder.

[LuvVA]

Originally Posted by austindoxie1972

This is a hard question because there are so many variables. One thing I'm noticing in the Tysons area is that there are a lot of rentals available -- and more condos and apartments are on the way. I'm thinking there will be an oversupply fairly soon. The Ascent in Tysons was giving away 3 months free rent with a 12 month lease, including a free indoor parking spot. Unreal. But they are hurting. AND...another building is going up right behind them, with more units coming online.

I don't know if this is true, but a friend at Freddie Mac and an appraiser who works in Tysons said most new apartment buildings are financed with 7- to 10-year balloon loans. At some point, some may flip into condo communities, especially if they can't find suitable investor financing. I own a condo in Tysons and wonder what this will do to the value of my place.

Just some things to ponder.

Thank you for this information. Didn't know 'The Ascent in Tysons' was offering this.

Two years ago, I rented apartment in Tysons area, didn't find any such deal. They must be having too much supply now and I heard there are more high rise apartments/condos coming up in Tysons in the next few years.

I have been thinking of investing in a similar way in tysons area and was keen to monitor this thread to get some idea.

[bmwguydc]

That's the main issue with the TOD's in Arlington and the Tysons Corridor, over supply. The communities are not built out yet, so there is always the prospect of a new rental or condo coming along, hence, oversupply could be an issue, and/or liquidity issues as it can be more difficult to sell an older condo with new supply on the market at a similar price point. You may not get much appreciation at all, because it is not an area that historically held value with the limited supply, such as areas Downtown or in other urban environments, such as Manhattan. Suburban condos are a gamble from a purely investment standpoint, as you want to buy at a low ebb and find a board that controls costs as best as possible to minimize expenditures in the form of assessments, which are not generally factored into prevailing rental prices. The other pitfall with new construction is buying in a building where there are too many investors or speculators as the market can go south quickly, as happened in Miami, where apartments were appreciating at a rapid rate during construction, but then the bottom fell out of the market. You would also be competing with rental communities for tenants, and large residential management companies can afford to take a loss, as with the three-month special for new tenants, whereas a private landlord still has the fixed expenses associated with the unit that cannot be spread over as wide a portfolio in most cases.

Two bedroom condos are always better than one bedroom, both for rentals, and for sales, since there are going to be more one and studio rentals on the market, but fewer two and larger bedroom units. If it is a split two bedroom plan with two bathrooms, then it's a good match for roommates, which can make it a more attractive unit from a rental perspective, one that can command a multiplier of the rental cost per square foot when compared to a one bedroom in the same building, or even a two bedroom with only one bathroom that is not a split plan. Split plans have the main living areas, living/dining and kitchen at the center of the apartment with bedrooms on either side of this central area. However, I would not buy a two bedroom further out, as that's risky, especially in smaller buildings.

Reston is going to be similar with supply increasing as the Metro is built to the airport. There are areas close to Metro that can be redeveloped, both as rentals and condos, so it is still an unknown in the next few years as to the level of supply and the prices that the market will command in that area. Parts of Arlington are better in that regard, but that is more to the east side of the county, such as nothing west of Courthouse on the Orange Line and not south of Crystal City on the Blue Line. For longer-term appreciation, the Columbia Pike corridor might not be a bad consideration, but that is dependent upon mass transit options, and the majority of the buildings are older and that usually can equate to higher fees and assessments because of repairs to the roof, parking lots, elevators, etc. and such buildings don't usually have full amenities and can have dated floorplans with fewer bathrooms, which can be an issue when you want to maximize your rent potential.

[LoveAlbuquerque]

If you can break-even in monthly cash flow, yes, it would be a great investment. By breaking even, the monthly rent must be equal to your monthly payment for mortgage+escrow+HOA. Not sure if you can break even when factoring in the HOA, since it may be $400 or higher in desirable locations.

Also keep in mind you would have broken stuff fixed once in a while, since things break down overtime. However, if you are handy and available, this wouldn't be an issue.

[LetsRock]

Originally Posted by LoveAlbuquerque

If you can break-even in monthly cash flow, yes, it would be a great investment. By breaking even, the monthly rent must be equal to your monthly payment for mortgage+escrow+HOA. Not sure if you can break even when factoring in the HOA, since it may be $400 or higher in desirable locations.

Also keep in mind you would have broken stuff fixed once in a while, since things break down overtime. However, if you are handy and available, this wouldn't be an issue.

You also get the tax deduction on the mortgage interest that will lower your overall taxes.

[austindoxie1972]

Originally Posted by LetsRock

You also get the tax deduction on the mortgage interest that will lower your overall taxes.

Also add depreciation. This, for me, is a HUGE tax advantage. I depreciate the value of my property in Texas. It makes a difference.

[John7777]

Originally Posted by spencgr

Why in the world would you look to invest in something where you are just "breaking even"? Might as well stash that money under a mattress.

Well, depending on whether or not you have a mortgage, someone might be buying you a condo, even if there is no positive cash flow. Or, a person might just want the security of owning some real estate. Money under a mattress hasn't been such a good idea, historically. I can show you plenty of houses that cost $35K in 1975 and now cost $600K or more.

[John7777]

Actually, I've been thinking along the same lines. I'd like to keep some property in the USA, but I also want to travel and maybe live overseas for a few years. I'm retired and can go wherever I want. Anyway, let's say I have an extra $600K that's not invested in the stock market. No big deal, but enough to buy two condos. Or, perhaps three houses in a small college town. I'd be paying cash, so renting them out to achieve a positive cash flow probably wouldn't be too hard. And I'd always own them.

It would be easy enough to turn over management of the properties to a property management company.